The effect of cap and trade policy on the economy, welfare and renewable energy for the Moroccan case: a partial equilibrium approach
Résumé
In this paper, we are interested in cap-and-trade policy, or the implementation of pollution
permits, as a mean to decrease CO2 emissions, which is the main cause of global warming, for
the case of Morocco. To do so, we used a partial equilibrium model for the cereals market and
the energy sector by simulating three scenarios of total emissions caps, namely a 1% decrease
in emissions, a 5% decrease and a 7.5% decrease. We used this approach because we are
concerned with one market, namely the cereals market and after designing the model wich is a
system of equations capturing the interactions between fossil energy, renewable energy and
cereals market, we log-linearized the model that we solved using matrix algebra with Octave.
The results show that these forced emissions decreases have a very small effect on the decrease
in income representing households welfare, remaining the same even in the 7.5% decrease
scenario, as well as an increase in solar energy production and consumption. Therefore, a cap
and trade system with a reasonnable cap will reduce emissions without affecting that much
households welfare, while encouraging renewable energy production at the same time.
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